PassThrough Investments and principals pay USD1.1m to settle CFTC forex fraud charges
The US Commodity Futures Trading Commission (CFTC) has issued an order settling charges that PassThrough Investments, LLC (PTI) (aka PassThrough Investments Group, LLC), and its principals, Stephen Brantley and Dwayne Bryant Dawson, all of Spring, Texas, fraudulently solicited and accepted at least USD2.6 million from at least 60 members of the public to participate in an off-exchange foreign currency (forex) pool that traded on a leveraged or margined basis.
The CFTC order requires PTI, Brantley, and Dawson to each pay a USD140,000 civil monetary penalty and to pay, jointly and severally, restitution of USD701,617. The order also imposes permanent trading and registration bans against the three respondents and requires them to cease and desist from further violations of the Commodity Exchange Act, as charged.
The order finds that in soliciting actual and prospective customers from approximately April 2010 through October 2010, Brantley and Dawson knowingly or recklessly omitted material facts and made material misrepresentations regarding the likelihood and the amount of profits and the reliability and/or legitimacy of the individuals trading the pooled funds. For example, Brantley and Dawson provided actual and prospective PTI customers with PTI account agreements and payout schedules that promised returns of at least 200 per cent and represented that the customer’s funds were “in the market,” the order finds.
In addition, the order finds that Brantley represented to prospective customers that the pool operators had been engaged in profitable forex trading for a long time, the investment was “solid,” and Brantley had “really checked the pool operators out.” The order also finds that Dawson represented to prospective customers that the pool operators found a “sweet spot” in the forex market where “they would make money if the market goes up or goes down” and the pool’s trading success would go until “Jesus returns.”
In fact, the order finds that Brantley and Dawson did little to nothing to confirm that the pool operators had been successful for a long time, or were currently successful in forex trading and “therefore had no basis for making the representations.”
The order further finds that the pool appears to have operated as a Ponzi scheme by paying so-called returns to customers with the customers’ own money or the money of other customers. In addition, Brantley and Dawson failed to disclose to actual or prospective PTI customers that the pool paid PTI fees of 20 per cent of the amount of the deposit for each new PTI customer whose funds were deposited in the pool, according to the order.
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